The government is seeking broad changes to address the under-development of the retirement phase of the superannuation system. This has come about as a result of a recent government review into the purposes of the retirement system which noted that substantial improvements should be made in how the super system delivers adequate incomes in retirement.
With median superannuation balances of men and women approaching retirement by 2060 projected to be around $450,000, the government has an incentive to ensure that the system delivers adequate incomes in retirement. It concedes that currently, retirement involves multiple decisions (eg when to retire and whether to keep money in super), difficult trade-offs (eg how to invest savings, both in and out of super), and complex interactions with other systems such as tax, social security, aged care and housing.
As a part of the planned improvements, the government is proposing to codify the requirement for superannuation trustees to develop a retirement income strategy for the members of their fund who are retired or approaching retirement. This would apply to all trustees, including trustees of SMSFs and APRA funds.
The strategy can be formulated for all members generally or a subset of members as identified by the trustee and should outline how the trustee intends to assist their members to achieve the following objectives:
According to the government, where competing objectives are present, the strategy should also seek to identify how trustees intend to assist their members balance these objectives and whether the trustee’s intended assistance is likely to increase or decrease the retirement incomes of their members.
Remember once the strategy requirement is codified, trustees will need to review their fund’s performance against the retirement strategy on at least an annual basis. When reviewing, assumptions made about the generality of their members as well as other factors need to be considered. Trustees should consider reviewing their strategy more frequently than on an annual basis if the characteristics of the fund change, new information about the fund’s membership becomes available, or outside circumstances change.